Sustainable Building Certification and the Rent Premium: A Panel Data Approach

Jan 31, 2012

• Green buildings can have an economic advantage because they are likely to have "longer economic lives, lower marketability risk, and a lower risk of technical and regulatory obsolescence." The interest in occupying green certified buildings contributes to a higher market value and ability to charge rental premiums.

This paper investigates whether obtaining sustainable building certification entails a rental premium for commercial office buildings and tracks its development over time. To this aim, both a difference-in-differences and a fixed-effects model approach are applied to a large panel dataset of office buildings in the United States in the 2000–2010 period. The results indicate a significant rental premium for both ENERGY STAR and LEED certified buildings. Controlling for confounding factors, this premium is shown to have increased steadily from 2006 to 2008, followed by a moderate decline in the subsequent periods. The results also show a significant positive relationship between ENERGY STAR labeling and building occupancy rates.

Reichardt, Alexander,Fuerst, Franz, Rottke, Nico, & Zietz, Joachim (2012) Sustainable Building Certification and the Rent Premium: A Panel Data Approach, Journal of Real Estate Research, 34:1, 99-126, DOI: 10.1080/10835547.2012.12091325

Alexander Reichardt
Franz Fuerst
Nico Rottke
Joachim Zietz
Journal of Real Estate Research
Published & professionally reviewed by: 
Taylor & Francis
American Real Estate Society

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